November 10, 1998
CAMBRIDGE INVESTMENT GROUP, PETITIONER-APPELLANT,
FIRST CHICAGO BANK OF RAVENSWOOD, NATIONAL BOULEVARD BANK, TRUST NO. 8368, AND SACRAMENTO CRUSHING CORPORATION, RESPONDENTS-APPELLEES.
The opinion of the court was delivered by: Justice Gordon
IN THE MATTER OF THE APPLICATION OF THE COUNTY TREASURER AND EX OFFICIO COUNTY COLLECTOR OF COOK COUNTY ILLINOIS FOR ORDER OF JUDGMENT AND SALE OF LANDS AND LOTS UPON WHICH ALL OR A PART OF THE GENERAL TAXES FOR THE 1990 TAX YEAR ARE DELINQUENT PURSUANT TO APPLICABLE SECTIONS OF THE REVENUE ACT OF 1939, AS AMENDED,
Appeal from the Circuit Court of Cook County No. 93CoTD3536
Honorable Michael J. Murphy, Judge Presiding.
This case comes before us on an appeal from a final judgment of the Circuit Court of Cook County that a property tax sale held pursuant to the Revenue Act of 1939 (35 ILCS 205/1 et seq. (West 1992) was a sale in error. The court sustained the protest of respondent First Chicago Bank of Ravenswood (Bank or First Chicago) to the petition of Cambridge Investment Group (Cambridge) for a tax deed, and voided the sale of delinquent property taxes to Cambridge. Cambridge appeals. For the reasons explained below, we dismiss the appeal for lack of jurisdiction without reaching the merits.
The facts relevant to our Disposition may be briefly stated. In March 1992 Cambridge purchased the delinquent taxes on two parcels of property at the annual tax sale conducted by the Cook County Treasurer, in his capacity as the ex officio County Collector. The property was owned by National Boulevard Bank of Chicago Trust No. 8368, of which Sacramento Real Estate Corporation was the sole beneficiary, subject to a mortgage held by First Chicago. There is essentially no dispute that at the tax sale the parcels were initially called in permanent real estate index number (PIN) order, but were not sold at the time because they were listed in the Collector's records as being in bankruptcy. However, after proceedings outside of the sale area, in which the Collector's Office determined that the parcels were not in fact in bankruptcy, the parcels were offered for sale and sold at the close of the regular sale day. Cambridge was the successful bidder, and paid the County Clerk the back taxes on the property, plus all penalties and interest thereon.
In December 1993 Cambridge filed a petition for tax deed for the two parcels. In February and March 1994 First Chicago redeemed the parcels under protest, contending that the proper procedures had not been followed in the tax sale process in that the parcels were sold out of PIN sequence. In conjunction with its certificate of protest, the Bank deposited with the County Clerk a sum of money equal to the amount Cambridge had paid for the property, plus an additional sum it potentially owed as a penalty for the privilege of redeeming its property (referred to as "statutory penalty interest"). The case was tried to the bench between September and November 1994.
In February 1995 the circuit court entered a written memorandum and order denying the protest. The court retained jurisdiction over the case to award Cambridge expenses and attorney fees, as authorized by statute. See 35 ILCS 205/253(f) (West 1992). In July 1995, on the motion of Cambridge for release of funds, the court directed the County Clerk to disburse to Cambridge all amounts it had paid at the tax sale and any taxes it had subsequently paid on the properties, but to retain the moneys deposited by the Bank in connection with its redemption under protest in an interest-bearing account. The order provided that "pursuant to Supreme Court Rule 304(a), that there is no reason to delay the enforcement or appeal of this judgment order."
In August 1995, still before the court had awarded attorney fees or expenses, the Bank filed a motion to vacate or modify the judgment entered in July. In January 1996 the court reversed its February 1995 order and entered a written memorandum sustaining the Bank's protest on the grounds that the tax sale was a "private sale" and had not been conducted in PIN order. On February 13, 1996 the court entered an order consistent with the January 1996 memorandum. The order directed the County Clerk to keep sufficient funds to pay all of the taxes, interest and late payment penalties owed to the County on the two parcels, and return to the "party redeeming" all remaining money it held. The order provided that it was "a final and appealable order as to all issues raised in the Redemption Under Protest and no just reason exists to delay enforcement and any appeal of this Order."
On February 20, shortly after the circuit court entered its February 1996 order, Sacramento Real Estate Corporation (Real Estate) filed for Chapter 11 bankruptcy in the bankruptcy court for the Northern District of Illinois. In re Sacramento Real Estate Corporation, No. 96--B--3992. On February 22, 1996, respondent Sacramento Crushing Corporation (Crushing) and Sacramento Corporation (Sacramento), the parent company to Real Estate and Crushing, followed suit, and filed their own separate Chapter 11 bankruptcy petitions. In re Sacramento Crushing Corporation, No. 96--B--4120; In re Sacramento Corporation, No. 96--B--4121. The three bankruptcy proceedings were consolidated in the bankruptcy court in May 1996. The consolidated case was dismissed in December 1996, and closed in May 1998. During the course of the bankruptcy action, the bankruptcy court determined that the amount refunded by the circuit court to the "party redeeming" did not belong to the Bank, but was the property of the bankruptcy estate of the debtors.
On February 26, 1996, subsequent to the bankruptcy filings by the Sacramento entities, but within 30 days after the circuit court entered its February 1996 order sustaining the redemption under protest, Cambridge filed a motion for reconsideration of the court's January 1996 memorandum and February 1996 order. The court denied Cambridge's motion for reconsideration in April 1996. Later in April 1996 Cambridge filed this appeal.
As noted above, we find the appeal must be dismissed for lack of jurisdiction.
As a reviewing court, we must be certain of our jurisdiction prior to proceeding in a cause of action. R.W. Dunteman Co. v. C/G Enterprises, Inc., 181 Ill. 2d 153, 159, 692 N.E.2d 306, 310 (1998). We are obliged to dismiss an appeal if we lack jurisdiction, even if no party to the appeal has raised the issue. Shanklin v. Hutzler, 277 Ill. App. 3d 94, 99, 660 N.E.2d 103, 106 (1995); Fligelman v. City of Chicago, 264 Ill. App. 3d 1035, 1037, 637 N.E.2d 1195, 1196 (1994). In this case we begin with the uncontrovertible rule that a reviewing court has no jurisdiction over an appeal absent a properly filed notice of appeal. Niccum v. Botti, Marinaccio, DeSalvo & Tameling, Ltd., 182 Ill. 2d 6, 7, 694 N.E.2d 562, 563 (1998) ("filing a notice of appeal is the jurisdictional step which initiates appellate review"); R.W. Dunteman, 181 Ill. 2d at 159, 692 N.E.2d at 310 ("[t]he timely filing of a notice of appeal is both jurisdictional and mandatory"); Childers v. Kruse, No. 2-97-0710 (June 22, 1998) ("[a] timely notice of appeal is both jurisdictional and mandatory").
In this case the February 13 order disposed of all issues relating to the redemption under protest, and also stated that it was a final and appealable order. It was to all appearances an order from which an appeal could be taken. The impediment to our jurisdiction lies in the fact that Cambridge's notice of appeal was filed during the Sacramento entities' bankruptcy proceeding.
Section 362 of the Bankruptcy Code stays "all entities," immediately upon the filing of the bankruptcy petition, from
"(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;
(4) any act to create, perfect, or enforce any lien against property of the estate[.]" 11 U.S.C. §362(a)(1), (a)(3), (a)(4) (1994).
There is no dispute that the motion to reconsider and the notice of appeal were filed during the pendency of the stay. The stay takes effect immediately upon the filing of the debtor's petition in bankruptcy, regardless of whether the other parties to a stayed proceeding are aware that the petition has been filed. 11 U.S.C. §362(a) (1994); Constitution Bank v. Tubbs, 68 F.3d 685, 691 (3rd. Cir. 1995); 3 Collier on Bankruptcy §362.11 at 362-115 (15th ed. rev. 1998) (hereinafter Collier). Unless a party requests relief from the stay from the bankruptcy court, the stay lasts until (1) with respect to acts against property of the estate, until the property is no longer property of the estate, or (2) with respect to any other act, until the earliest of the case being (a) the case being closed, (b) the case being dismissed, or (c) a discharge being granted or denied. 11 U.S.C. §362(c) (1994). The bankruptcy case was not dismissed until long after Cambridge's filings, and the property--the nature of which we will discuss more fully below--was still property of the estate at the time of the filings.
There remains the question whether the filings in fact violated the stay. A subsidiary question is, even if the filings were in violation of the stay with respect to the debtor, were they also void with respect to other parties in the case--in this case, the Bank. We must answer both of these questions in the affirmative.
It is not entirely clear under which subsection of section 362 of the Bankruptcy Code Cambridge's filings were stayed. Initially the most likely candidate would appear to be section 362(a)(1), which as noted stays inter alia the "continuation *** of a judicial *** proceeding against the debtor that was *** commenced before the commencement of the [bankruptcy] case[.]" 11 U.S.C. §362(a)(1) (1994). However, the underlying proceeding is a petition for tax deed, which it is not clear is an action "against the debtor." Rather, it is an in rem action brought against the property the taxes on which Cambridge purchased. See Smith v. D. R. G., Inc., 63 Ill. 2d 31, 35, 344 N.E.2d 468, 470 (1976) (tax sales are actions in rem, rather than in personam); In re Application of County Treasurer, 276 Ill. App. 3d 1084, 659 N.E.2d 457, 459 (1995) (same); Wilder v. Finnegan, 267 Ill. App. 3d 422, 425, 642 N.E.2d 496, 499 (1994) (same); Cf. In re Shamblin, 890 F.2d 123, 125 (9th Cir. 1989) (Illinois tax sale held to violate automatic stay imposed by section 362(a)(4) of the Bankruptcy Code (staying acts to create, perfect or enforce a lien against property of the bankruptcy estate), without even mentioning section 362(a)(1)). However, this is not determinative that subsection (a)(1) is inapplicable. See In re Molitor, 183 B.R. 547, 553-54 (Bankr. E.D.Ark. 1995) (holding that an in rem probate proceeding was stayed because the trustee (in the debtor's stead) "was required to take defensive action to protect the interest of the bankruptcy estate"). Further, an argument could be made that once there has been a redemption under protest, the character of the action changes, and becomes much more in the nature of an adversarial proceeding, with the tax purchaser attempting to obtain the statutory penalty interest and the delinquent taxpayer attempting to ward off the purchaser and recover some of the funds it has deposited with the Clerk. See 35 ILCS 205/253(f) (West 1992).
At any rate, we need not conclusively answer the question whether Cambridge's motion to reconsider and its appeal were stayed under subsection (a)(1), because they would seem definitely to have been stayed under subsection (a)(3), as acts "to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." *fn1 Section 541 of the Bankruptcy Code notes that "property of the estate" includes "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. §541(a)(1) (1994). Such property is part of the estate "wherever located and by whomever held[.]" 11 U.S.C. §541(a) (1994).
There are two "properties" which Cambridge's filings could be considered "acts" to obtain or control: (1) the real property on which Cambridge was initially attempting to obtain the tax deed; and (2) the statutory penalty interest. An argument could be made that Cambridge's filings were not acts to obtain the real property, because as noted above, the character of the petition for tax deed changes once a redemption under protest has been filed. Once property has been redeemed--even under protest--a purchaser at a tax sale cannot obtain a tax deed. See 35 ILCS 205/253(f) (West 1992). Thus it is an unlikely result to conclude that Cambridge's filings constituted acts to obtain or control this property.
However, in order to redeem the property a redeemer must deposit with the County Clerk an additional amount ("statutory penalty interest") over and above the back taxes owed. 35 ILCS 205/253(c)(2) (West 1992). In this case the statutory penalty interest was substantial--in excess of $300,000--as it had accrued at a rate of 18% (of the over $500,000 Cambridge had paid at the tax sale) per six months. See 35 ILCS 205/253(c)(2) (West 1992). If the circuit court had not sustained the protest in this case, Cambridge would have been entitled to the statutory penalty interest in addition to the amount it paid for the property (plus expenses and attorneys fees). 35 ILCS 205/253(f) (West 1992). Cambridge's motion to reconsider and notice of appeal were clearly attempts to obtain this property.
The bankruptcy court expressly determined that this property constituted property of the debtor's estate. Cambridge might contend that it should not be bound by this determination, as it (Cambridge) was not a party to the bankruptcy case (in fact, its petition to intervene was denied by the bankruptcy court without prejudice). We note, however, that there is authority that the determination of a bankruptcy court regarding the effect of a stay trumps a determination made by a non-bankruptcy court. See Raymark Industries, Inc. v. Lei, 973 F.2d 1125, 1132 (3d Cir. 1992), in which the Third Circuit Court of Appeals directed the bankruptcy court to enter an order voiding orders of the California appellate and supreme courts on the basis that the orders of those courts were void as violative of the automatic stay, notwithstanding that the California courts had determined that their actions did not violate the stay. See also In re Molitor, 183 B.R. 547, 553 (Bankr. E.D.Ark. 1995), holding that probate proceedings which took place during an automatic stay were in violation of the automatic stay, notwithstanding that the probate court had decided to proceed over the objection of the bankruptcy trustee.
Moreover, in any event, we need not conclusively determine that the statutory penalty interest itself constituted property of the estate, because it is clear that Sacramento's cause of action against the Bank for the statutory penalty interest was property of the estate. It is beyond contravention that a debtor's cause of action constitutes property of the estate. United States v. Whiting Pools, 462 U.S. 198, 205 n. 9, 76 L. Ed. 2d 515, 522 n. 9, 103 S. Ct. 2309, 2313, n. 9 (1983), quoting H.R. Rep. No. 95-595, p. 367 (1977) and S. Rep. No. 95-989, p. 82 (1978); In re M & L Business Machines, Inc., 136 B.R. 271, 275 (Bankr. D.Colo. 1992); Matter of U.S. Marketing Concepts, Inc., 113 B.R. 487, 490 (Bankr. N.D.Ind. 1990); In re Moore, 110 B.R. 924, 926 (Bankr. C.D.Calif. 1990); Collier, §541.08 at 541-41. In this case even if we consider that at the outset of the bankruptcy case it was not conclusively determined as between the debtor and the Bank who was entitled to the statutory penalty interest, it is clear at least that Sacramento had a cause of action to attempt to obtain that property, and it is equally clear that Cambridge's filings in the state court case--its motion to reconsider and its notice of appeal--would potentially have destroyed this property.
Accordingly, Cambridge's motion to reconsider and its appeal both violated the automatic stay imposed by section 362(a)(3) of the Bankruptcy Code as attempts to obtain or control "property of the estate." Because the filings violated subsection (a)(3), they were also invalid with respect to the Bank. Subsection (a)(3) stays acts against third parties which might affect property of the estate as well as acts taken with respect to the debtor. Borman v. Raymark Industries, Inc., 946 F.2d 1031, 1035 n. 1 (3rd. Cir. 1991) (because subsection (a)(3) applies regardless of whether the property is in the possession of the debtor, it applies to actions against third parties as well as those against the debtor). See also 11 U.S.C. §541(a) (1994) (property which meets the definitions of "property of the estate" is part of the estate "wherever located and by whomever held"); In re Molitor, 183 B.R. at 553 ("[t]he property does not have to be in the possession of the debtor for the stay to apply").
Because Cambridge's motion to reconsider and its notice of appeal were filed in violation of the stay, they were void. *fn2 In re Capgro Leasing Associates, 169 B.R. 305, 313-14 (Bankr. E.D.N.Y. 1994) (once stay has taken effect even the debtor may not file an appeal, and any attempt to do so is "a null and void act--as if it never happened"); J. McCafferty, The Effect of Bankruptcy on the Debtor's Pending Litigation, 93 Comm. L. J. 214, 237 (1988) (stating that any appeal by the non-debtor would be stayed under section 362(a)(1)). See also Constitution Bank, 68 F.3d at 692, quoting Maritime Electric Co. v. United Jersey Bank, 959 F.2d 1194, 1207 (3rd Cir. 1991) (once the stay is in effect, "'the parties themselves [can-]not validly undertake any judicial action material to the *** claim against' the debtor *** includ[ing] the filing of motions, which are void ab initio, unless the bankruptcy court later grants retroactive relief"); Easley v. Pettibone Michigan Corp, 990 F.2d 905 (6th Cir. 1993) (complaint filed in state court during pendency of bankruptcy action violated automatic stay and did not toll statute of limitations); In re Carolina Steel Corp., 179 B.R. 413, 417 n. 6 (Bankr. S.D.N.Y 1995) (refiling of complaint in state court without prior leave from bankruptcy court was void ab initio); In re Confidential Investigative Consultants, Inc., 178 B.R. 739, 750 (Bankr. N.D.Ill. 1995) ("[o]rdinarily, under 11 U.S.C. §362, a suit filed during pendency of the automatic stay, even if in ignorance of the stay, is void and does not toll limitations"); Howard v. Howard, 670 S.W.2d 737, 739 (Tex. App. 1984) ("[s]ince the automatic stay precluded further action in the State district court, appellant could not have filed her motion for new trial until the stay was lifted or modified by the bankruptcy court").
Thus it is apparent that the notice of appeal filed by Cambridge violated the bankruptcy stay. Because the notice of appeal was filed in violation of the stay, it was void ab initio and of no effect. In re Soares, 107 F.3d 969, 976 (1st Cir. 1997); 3 Collier §263.11, at 362-115--362-116. However, a properly filed notice of appeal is required for jurisdiction to attach in this Court. Niccum, 182 Ill. 2d at 7, 694 N.E.2d at 563. Because there is no valid notice of appeal, we are without jurisdiction, and must dismiss the appeal.
Even if somehow Cambridge's motion to reconsider and its notice of appeal could be construed as non-violative of the stay, the circuit court's ruling on the motion to reconsider would have violated the stay. See In re Soares, 107 F.3d at 973-75 (court may take none but "ministerial" action with respect to a pending case involving a debtor ); In re Lyngholm, 24 F.3d 89, 91 (10th Cir. 1994), quoting Ellis v. Consolidated Diesel Electric Corp., 894 F.2d 371 (10th Cir. 1990) ("'absent the bankruptcy court's lift of the stay, *** a case such as the one before us must, as a general rule, simply languish on the court's docket until final Disposition of the bankruptcy proceeding'"); In re Everett, 178 B.R. 132, 141 (Bankr. N.D.Ohio 1994) (state court's ruling on motion to vacate violated automatic stay even though court ruled in favor of debtor and debtor filed motion in state court before it filed for bankruptcy); In re Brady, 35 B.R, 551, 553 (Bankr. E.D.Pa. 1983) (state court post-petition dismissal of debtor's pre-petition motion to vacate state court judgment violated stay); 3 Collier §362.03 at 362-16 ("if the non-bankruptcy court continues the action or enters a judgment notwithstanding the imposition of the automatic stay, the action or judgment should be considered ineffective against the debtor"). Since the circuit court's denial of Cambridge's motion to reconsider would have been void, the motion would still have been pending at the time the notice of appeal was filed. Accordingly, the notice of appeal would have been of no effect. See 155 Ill. 2d R. 303(a)(2) ("a notice of appeal filed before the entry of the order disposing of the last pending post-judgment motion shall have no effect"). The fact that the court ruled against Cambridge on its motion to reconsider is irrelevant to the question whether the ruling violated the automatic stay. See Ellis, 894 F.2d at 373 ("[t]he operation of the stay should not depend on whether the [trial] court finds for or against the debtor") (emphasis in original); Everett, 178 B.R. at 141.
We recognize that appeals have been allowed to proceed with respect to co-defendants of a debtor even when the automatic stay applies with respect to the debtor. See, e.g., Mason v. Oklahoma Turnpike Authority, 115 F.3d 1442, 1450 (10th Cir. 1997); Pitts v. Unarco Industries, Inc., 698 F.2d 313, 314-15 (7th Cir. 1983). However, these cases are distinguishable. First, Mason and Unarco were concerned solely with the question of whether appeals against solvent co-defendants were stayed under section 362(a)(1). Mason, 115 F.3d at 1450; Unarco, 698 F.2d at 314. In this case, on the other hand, both the motion to reconsider and the notice of appeal were stayed under section 362(a)(3) as acts to obtain or control property of the estate. Accordingly, those actions were without effect even with respect to the Bank. Borman, 946 F.2d at 1035 n. 1; 11 U.S.C. §541(a) (1994); In re Molitor, 183 B.R. at 553. Also, in Mason the notice of appeal had already been filed before the debtor filed for bankruptcy. See Mason, 115 F.3d at 1449. (It is unclear whether the same is true in Unarco, a per curiam opinion.) In this case, however, Cambridge did not fulfill the jurisdictional requirement of filing its notice of appeal. The notice it filed was void ab initio. See 3 Collier, § 362.11 and n. 1, at 362-115--362-116. Accordingly, there was no appeal to allow to proceed.
We note that the automatic stay did not preclude Cambridge's right to file post-judgment motions and to appeal. Section 108(c) of the Bankruptcy Code provides in pertinent part that if "applicable non-bankruptcy law" fixes a period for commencing or continuing a civil action in a non-bankruptcy court, and that period has not expired before the date on which the bankruptcy petition was filed, the period "does not expire until the later of--(1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or
(2) 30 days after notice of the termination or expiration of the stay *** with respect to such claim." 11 U.S.C. §108(c) (1994).
In this case, the Illinois Code of Civil Procedure allowed Cambridge 30 days from the time the circuit court entered its order to file a post-judgment motion directed against the judgment (735 ILCS 5/2-1203 (West 1994)) and the Illinois Supreme Court Rules allowed Cambridge 30 days to file an appeal from the judgment (155 Ill. 2d R. 303(a)). Because Sacramento filed for bankruptcy less than 30 days after the circuit court entered its order holding the sale to have been a sale in error, neither period had at that point expired. Accordingly, Cambridge had 30 days to file either a post-judgment motion or a notice of appeal after receiving notice that Sacramento's bankruptcy had been dismissed. 11 U.S.C. §108(c)(2) (1994). See also Howard, 670 S.W.2d at 738-39 (motion for new trial was timely filed, although filed almost 6 months after final judgment, because it was filed within 30 days after stay was modified in bankruptcy proceeding and the opposing party had filed for bankruptcy only four days after entry of final judgment).
However, if Cambridge had filed a post-judgment motion after the dismissal of the bankruptcy action, the notice of appeal it filed in April 1996 would have been invalid under our Supreme Court rules, because as previously noted a notice of appeal filed before resolution of the last pending post-judgment motion is of no effect, even if the motion is filed after the notice of appeal. See 155 Ill. 2d R. 303(a)(2). Accordingly, Cambridge would have had to refile its notice of appeal after Disposition of its refiled motion to reconsider, which it did not do.
For the reasons above stated, we dismiss the appeal of Cambridge Investment Group for lack of jurisdiction because of the lack of a valid notice of appeal.
CAHILL and LEAVITT, JJ., concur.